Ketamine therapy has a long way to go before it becomes a major part of the behavioral health industry.

The high-profile stumbles at Field Trip Health & Wellness and Ketamine Wellness Center highlight the fraught environment the half-a-century-old drug faces in treating mental health at scale. It also illustrates the risk of moving too early on a market opportunity.

“You never want to be the guy that pays the money to educate the masses about something,” John Minahan, CEO of San Francisco-based Mindful Health Solutions, told Behavioral Health Business. “The guy behind you, after you run out of money, reaps the benefit.”

Still, several urban practices have found varying degrees of success in providing a costly service to those who can pay thousands of dollars out-of-pocket every month. Meanwhile, a handful of digital companies continue to build increasingly sizable businesses in the face of regulatory upheaval. 

And recent actions by the Drug Enforcement Administration raise the specter that the regulatory environment may become more complex.

Some providers have already come under fire for their prescribing practices. For example, the DEA rescinded the prescribing privileges of Dr. Scott William Smith, a South Carolina doctor who amassed a reported 3,000-person virtual ketamine practice called Smith Ketamine Services. The company allegedly sent messages to patients stating that Smith’s ability to “prescribe controlled substances [has] been suspended until further notice.” The company’s website says “The practice is closed and no longer making appointments.”

The DEA has not responded to a request for information. Smith could not be reached for comment by press time but has acknowledged Behavioral Health Business’ request for comment.

Smith Ketamine Services offered monthly telehealth visits, a 30-day prescription for sublingual ketamine and dosage adjustments at $250 per month. The cash-pay business posted a generic superbill signed by Smith on its website and portal through which patients could submit the bill to insurance plans for potential out-of-network coverage.

The DEA gave Smith notice the same day that it released a temporary rule that extends COVID-era flexibility for providers to prescribe controlled substances via telehealth without an in-person visit first.

The move by the DEA illustrates its aggressive attempts to tamp down any free-flowing prescribing of controlled substances in the shadow of the opioid epidemic, which ostensibly started during an era of soft oversight of physician prescribing, distributors and pharmaceutical companies.

Similar moves in the digital health space include the DEA’s actions against the digital pharma company TruePill and the scrutiny it has leveled against the mental health startup Cerebral. Several industry observers attribute a similar approach to its now-delayed proposed rules that would have severely cut back telehealth prescribing. 

However, the DEA’s actions against Smith do not appear to be part of a large effort by the DEA. A handful of other virtual ketamine therapy companies BHB has communicated with have not seen similar notices by the DEA. 

The deeper problem of ketamine centers

So far, the most significant issue facing ketamine therapy is simply getting people to pay for the service. This has been the bane of fast-growing and scaled market leaders.

“One of the challenges of building a retail model is that it can take a lot longer to figure out the core health of a business,” Dylan Beynon, CEO and founder of digital ketamine therapy provider Mindbloom, told BHB. “So sometimes, as people are raising venture capital, or if they go public on a Canadian stock exchange a little early and they have capital — there can be pressure to grow very quickly. But you actually haven’t figured out the core unit economics.”

Ketamine Wellness Centers, which claimed to be the largest ketamine therapy provider in the nation, abruptly shuttered in March, around the same time Field Trip announced it was pulling out of several states. A week later, Field Trip filed for protection from creditors in a Canadian court.

Public financial documents for both companies show serious financial losses and revenue growth well short of viability.

As of the end of 2022, Field Trip has amassed a deficit of $49 million since inception, has never been profitable and has posted a loss of $30 million in the nine months that ended Dec. 31. The company’s management disclosed as early as February that it didn’t see a way to grow revenue enough or to raise enough capital to keep afloat. In April 2022, five of its founders loaned the company $2.5 million. 

Delic Holdings Corp., the parent company of Ketamine Wellness Centers, similarly disclosed “material uncertainty that casts significant doubt” about the company’s continued existence. It disclosed a cumulative deficit of $15 million and a loss of  $3.5 million in the nine months ending Sept. 30. 

Delic acquired Ketamine Wellness Centers and merged it with another company called Ketamine Infusion Centres in 2021. Combined, Delic paid $13 million for the two companies. Ketamine Wellness Centers generates 92% of Delic’s revenue.

Neither Delic Corp. nor Field Trip has responded to requests for comment. 

“You never want to be the guy that pays the money to educate the masses about something … The guy behind you, after you run out of money, reaps the benefit.”

John Minahan, CEO of San Francisco-based Mindful Health Solutions

Peter/PetraMD announced on April 3 a plan to acquire Ketamine Wellness Centers for $1.15 million. That deal has since fallen apart due to troublesome actions on the part of Delic and Ketamine Wellness Centers. 

After the original announcement, Dr. Bryan Henry told Behavioral Health Business that he expected Peter/PetraMD, a virtual men’s and women’s health provider in Vero Beach, Florida, to acquire the company for $800,000 or less because of a troublesome deal process. Henry is the president of Peter/PetraMD.

“It was like a kindergarten show — that’s what we started calling it,” Henry said.

Field Trip’s reorganization efforts continue. It sold its Jamaica psilocybin research and production facility to William Mahfood, chairman of a beverage company called Wisynco Group Limited, for $350,000.

This was the only successful bid of 37 potential suitors for deals to acquire all of, some of, or to make an investment in Field Trip, according to a report from PwC, Field Trip’s monitor in the process. The report states that other bidders who made it late into the process are hashing out other offers but didn’t provide specifics. 

Overcoming barriers to scale

The offerings of center-based organizations such as Ketamine Wellness Centers and Field Trip and virtual providers such as Smith Ketamine Services face different challenges based on how they offer ketamine.

Many centers offer ketamine infusions, IV treatments that require more intense investments from the provider and patient. This form of ketamine is not cleared for the treatment of mental health. Instead, it’s an “off-label” use of ketamine. While legal and common, it’s often a hang-up for insurance plans, leaving patients to foot the bill. 

“For somebody to go into a ketamine clinic and pursue that type of treatment, you’re talking about thousands of dollars to do a few sessions, and that may or may not even include therapy,” Michael Kuntz, COO of the psychedelic therapy training company Fluence, said in an interview. “On the [business side], there is certainly continued demand from the patient population, but I don’t think there are enough folks in the patient population that can afford this type of treatment to put these companies in a position to succeed right now.”

BHB couldn’t find scholarly research on the cost of IV ketamine infusions. But reviews of several company websites find wide ranges on the cost of individual sessions or packages of sessions and services. It’s not uncommon for an individual session to cost between a few hundred to a thousand dollars, while successive care packages easily cost nearly $3,000 or more. 

Companies offering ketamine at-home virtually or in clinics as an ancillary service often look to lower dose sublingual (put under the tongue) tablets or the FDA-cleared esketamine treatment Sparvato, a nasal spray by Johnson & Johnson (NYSE: JNJ) subsidiary Janssen Neuroscience.

The use of esketamine or other low-dose treatments is still emerging in the behavioral health industry but has gained the most traction in digital health. Several startups have landed multi-million-dollar investment rounds but pale compared to the collective of other digital mental health funding efforts. 

In general, venture capital’s pullback on digital health investing, has added to the headwinds facing digital providers.

Nonetheless, companies like Mindbloom continue to grow. Founded in 2018 and launched in 2019, Mindbloom operates in 37 states, employs over 300 providers and has led over 250,000 sessions, Beynon said.

Mindbloom’s lighter intervention and business model undercuts most in-office ketamine therapy prices. Beynon said these sessions can cost $600 to $1,200. New patients pay about $200 per session and prices for existing patients are closer to $120 per session. Mindbloom bundles sessions and bills weekly.

“There’s still work to be done to continue to reduce the cost of treatments and get this to people more affordably by partnering with payers,” Beynon said.

In the meantime, Mindbloom has announced a handful of partnerships. Last year, in-home provider Kennedy Care and human resource management software provider 15Five announced they would add Mindbloom as an employee benefit. This year, the management consulting firm SHIFT announced a benefits partnership with Mindbloom. 

Beynon said that Mindbloom would still be able to operate even if the delayed DEA telehealth-prescribing rule were to go into effect. Ketamine is a Schedule III substance and, under the rule, that would allow for 30 days’ worth of medication before requiring an in-person exam. That would be enough time to complete a course of treatment, Beynon said.

The place for ketamine therapy

Americans’ acceptance of medical and recreational marijuana paved the way for other drugs that were previously tied to illicit use to become treatments for mental health, Dr. Sam Zand, founder and CEO of Anywhere Clinic and co-founder and chief medical officer of virtual psychedelics company Better U, told BHB.

However, it’s unlikely that a critical mass of Americans have heard of ketamine. And if they have, it’s as a horse tranquilizer or party drug. That stigma is a potent barrier to psychedelics for most people who don’t have direct and positive experiences with them. Despite the barrier, ketamine and psychedelics therapy providers still have to dedicate some portion of their efforts to public education.

“What we’ve done is called this psychedelic therapy for people that understand that,” Zand said. “We’ve called ketamine therapy for people who have been directly referred and seeking it. But there’s also another term that we want to popularize. And that’s neuroplastic therapy because that’s really what we’re after here, whether it’s psilocybin, ketamine or MDMA.”

Presently, ketamine is the only drug in this group of mind-altering substances that is approved for any use in the U.S. MDMA and psilocybin approvals may come within a year. 

In that way, ketamine has been a pioneer for drugs previously associated with illicit use. Still, most Americans don’t know about or have negative feelings about psychedelics. 

Ketamine therapy companies have often marketed themselves as psychedelic therapy companies even though no other drug than ketamine is presently accessible. This was largely done in the hope of establishing companies that could capture market share and/or establish infrastructure for pending psychedelic treatments to clear federal approvals. 

There’s still work to be done to continue to reduce the cost of treatments and get this to people more affordably by partnering with payers.

Dylan Beynon, CEO and founder of Mindbloom

Better U hopes to participate in pilot studies for other psychedelics, Zand said.

Minahan said Mindful Health Solutions uses ketamine as part of a stepwise clinical pathway for patients with severe depression that have tried other medications and failed to see improvements. First, patients are assessed and treated with psychotherapy. Then they are recommended to try transcranial magnetic stimulation (TMS).

The results of TMS are more durable than ketamine treatments, Minahan said. About 70% of Mindful Health Solutions’ TMS patients show positive results from the treatment. And half of that cohort show positive responses with “great durability.” Then if there is no response, patients may try esketamine, a low-dose ketamine option. About half of Mindful Health Solutions patients begin to experience meaningful improvements to their depression.

For patients that show some improvement, patients then may get IV ketamine treatments, Minahan said. 

This is all provided under a team of therapists and psychiatrists, adding a layer of coordinated medical care on top of the other treatments, Minahan said.

Mindful Health Solutions has 20,000 patients a month and lists 23 clinics in California, Georgia, Texas and Washington.

For Peter/PetraMD, the allure of adding ketamine therapy to its offerings of digital male and female wellness products is strong enough for it to launch its own virtual-reality-enabled service.

In partnership with the VR meditation company TRIPP, Peter/PetraMD will launch PsychMD, giving members Meta headsets and access to ketamine. The company owns a pharmacy company that operates in 46 states called Fortress Pharmaceuticals. It has also developed a national provider network of about 7,800 providers across the country that can provide in-person exams for Peter/PetraMD, making it one of the few digital health companies with both direct control over its supply chain and with national partnerships with local providers. 

“It’s gonna be very difficult for our competition to have any type of coverage in any state outside large metropolitan areas,” Henry said.